Canadian dollar falls against stronger greenback

TORONTO (Reuters) - The Canadian dollar fell against the U.S. dollar on Thursday, as slowing global growth prompted investors to buy the greenback as a safe haven.

Domestic bond prices fell as a positive outlook for equities markets made bonds less attractive.

At 9:28 a.m. (1328 GMT), the Canadian dollar was at C$1.0209 to the U.S. dollar, or 97.95 U.S. cents, down from C$1.0173 to the U.S. dollar, or 98.30 U.S. cents, at Wednesday's close.

The Canadian dollar is down 1.6 percent against the greenback so far this week, pressured by a hefty 50 basis point interest rate cut by the Bank of Canada and data that cast doubt on the resiliency of domestic spending amid faltering U.S. demand for Canadian goods.

However, the Canadian dollar is outperforming most other major currencies, riding the coattails of U.S. dollar strength, said Camilla Sutton, currency strategist at Scotia Capital.

"We see the U.S. dollar performing very well this morning, having gained more than a percent against a lot of the majors," she said.

The U.S. dollar rose after some key data out of Britain and the euro-zone came in below market expectations, pointing to slowing global growth.

Sutton said the greenback was also helped by concern over inflationary pressures in the United States, and the possibility that this will prompt the U.S. Federal Reserve to slow the pace of rate cuts.

The Fed has cut its key lending rate by an aggressive 3 percentage points since September to help curb its housing-led economic downturn. The Fed funds rate is now 2.25 percent.

The next clue for the Canadian dollar will come from the Bank of Canada's Monetary Policy Report at 10:30 EDT, which will update the bank's assessment of the domestic and U.S. economies.

The United States is by far Canada's largest trading partner.

BONDS FALL

Bond prices followed U.S. Treasuries lower as better than expected U.S. durable goods and jobless benefits data lessened the safe haven appeal of government debt.

That boosted the outlook for stocks and cut the appeal of government bonds, said Mark Chandler, fixed income strategist at RBC Capital Markets.

The overnight Canadian LIBOR rate LIBOR01 was at 3.0500 percent, down from 3.1067 percent on Wednesday.

Wednesday's CORRA rate CORRA= was 3.0021 percent, down from 3.0075 percent on Tuesday. The Bank of Canada publishes the previous day's rate at around 9 a.m. daily.

The two-year bond fell 11 Canadian cents to C$101.85 to yield 2.833 percent. The 10-year bond dipped 32 Canadian cents to C$102.33 to yield 3.708 percent.

The yield spread between the two- and 10-year bonds was 87.9 basis points, down from 88.8 basis points at the previous close.

The 30-year bond shed 61 Canadian cents to C$113.44 to yield 4.195 percent. In the United States, the 30-year treasury yielded 4.564 percent.

The three-month when-issued T-bill yielded 2.57 percent, up from 2.53 percent at the previous close.